Skip to main content

WILL THE $40 BILLION SAUDI INFRASTRUCTURE GIFT INFLUENCE TRUMP?


Photo: AFP
Photo: AFP
Written by Zainab Calcuttawala; Originally appeared at OilPrice.com
It’s “Infrastructure Week” in Washington, and foreign powers are taking note.
Ahead of President Donald Trump’s upcoming visit to the Middle East, Saudi Arabia has promised to make $40 billion of its sovereign wealth fund available to the United States to bankroll part of the roughly $1 trillion in infrastructure improvements that Trump promised on the campaign trail.
The move is reminiscent of the KSA’s strategy amongst its allies in the Gulf Cooperation Council (GCC), as well as Morocco and Jordan. This GCC + 2 group of kingdoms is regularly showered with billions of dollars in gifts from its wealthiest members, earmarked for similar construction projects, allowing the most stable Arab countries to remain intimately connected through financial obligations. The monarchial structure of these countries allows the lead executive to accept the sizeable donations without much fuss from the public. It’s just the way things are done there, and citizens of those regions generally accept.
But using foreign funds, especially those from a country such as Saudi Arabia – which only garnered favorable reactions from 31 percent of Americans polled by Gallup in February 2017 – could be another political trap for Trump.
The KSA had gone all-in on Hillary Clinton before the election, expecting her to continue to tweak policies put in place by Barack Obama. Contributions from GCC nations, especially Saudi Arabia, to the Clinton Foundation total in the millions. Reports of the serial grand donations made voters question Clinton’s allegiances in the 2016 elections. Trump could suffer a similar loss in faith if he begins accepting funding from monarchies willy-nilly – though censuring the new commander-in-chief in the media for any questionable action has led to fierce resistance from the White House and far right.
Riyadh’s most recent $40 billion gift is an effort to court support in the Trump administration, especially as the Saudi Aramco IPO approaches next year. Deputy Crown Prince Mohammed Bin Salman met Trump at the White House in the early days of the new administration. Local media took to labelling the trip a “historic turning point” in bilateral relations – a marked shift from rumors regarding friction between the two countries during Obama’s tenure. Nonetheless, the Department of Defense continued to approve the KSA’s weapons orders for use in Yemen and other regional squabbles, and Trump will likely continue that legacy.
The new president has already declared his support for a new U.S.-Saudi program with $200 billion in direct and indirect investments over the course of his presidency for use in technical development in the energy sector and other advancements in financial relationships between the two countries. As Zero Hedge pointed out earlier this week, it would be ironic if the Saudi funds used for energy research end up discovering new ways to lower shale extraction costs for American producers.
Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries (OPEC), has led a vociferous effort to deter additional shale production, particularly from the Permian Basin. The modest jump in oil prices seen after OPEC agreed on a 1.2 million bpd cut allowed hundreds of rigs in the U.S. to reactivate, causing barrel rates to tumble as Libya and Nigeria also tallied rising outputs. Riyadh needs a strong barrel price to guarantee a hefty valuation for Aramco ahead of the IPO, which is why it announced that the nation would extend its cuts through March 2018. Saudi Arabian clout in the oil community would take a hit if the plan to rebalance supply fails over the next few months.
There’s nothing Trump can really do about shale production. Unlike oil-rich countries in the Gulf, Africa, and South America, where nationalized oil companies are the norm, the U.S. oil sector is highly privatized. The CEOs of ExxonMobil, Chevron, and the hundreds of other oil companies active in the country reserve the right to decide when to drill and when not to drill. On top of that, Trump’s campaign vow of unleashing exploration and extraction prospects in the U.S. makes it unlikely that the White House would use regulatory power to curtail future fossil fuel development. Carving out a niche in the new administration looks to be an uphill battle for Saudi Arabia.

Comments

Post a Comment

Popular posts from this blog

Why States Still Use Barrel Bombs

Smoke ascends after a Syrian military helicopter allegedly dropped a barrel bomb over the city of Daraya on Jan. 31.(FADI DIRANI/AFP/Getty Images) Summary Barrel bombs are not especially effective weapons. They are often poorly constructed; they fail to detonate more often than other devices constructed for a similar purpose; and their lack of precision means they can have a disproportionate effect on civilian populations. However, combatants continue to use barrel bombs in conflicts, including in recent and ongoing conflicts in Africa and the Middle East, and they are ideally suited to the requirements of resource-poor states. Analysis Barrel bombs are improvised devices that contain explosive filling and shrapnel packed into a container, often in a cylindrical shape such as a barrel. The devices continue to be dropped on towns all over Syria . Indeed, there have been several documented cases of their use in Iraq over the past months, and residents of the city of Mosul, which was re
Post a Comment
Read more

Russia Looks East for New Oil Markets

Click to Enlarge In the final years of the Soviet Union, Soviet leader Mikhail Gorbachev began orienting his foreign policy toward Asia in response to a rising Japan. Putin has also piloted a much-touted pivot to Asia, coinciding with renewed U.S. interest in the area. A good expression of intent was Russia's hosting of the Asia-Pacific Economic Cooperation summit in 2012 in Vladivostok, near Russia's borders with China and North Korea. Although its efforts in Asia have been limited by more direct interests in Russia's periphery and in Europe, Moscow recently has been able to look more to the east. Part of this renewed interest involves finding new export markets for Russian hydrocarbons. Russia's economy relies on energy exports, particularly crude oil and natural gas exported via pipeline to the West. However, Western Europe is diversifying its energy sources as new supplies come online out of a desire to reduce its dependence on Russian energy supplies . This has
Post a Comment
Read more

LONDON POLICE INDIRECTLY ENCOURAGE CRIMINALS TO ATTACK RUSSIAN DIPLOMATIC PROPERTY

ILLUSTRATIVE IMAGE A few days ago an unknown perpetrator trespassed on the territory of the Russian Trade Delegation in London, causing damage to the property and the vehicles belonging to the trade delegation , Russian Foreign Ministry Spokeswoman Maria Zakharova said during the September 12 press briefing. The diplomat revealed the response by the London police was discouraging. Police told that the case does not have any prospects and is likely to be closed. This was made despite the fact that the British law enforcement was provided with video surveillance tapes and detailed information shedding light on the incident. By this byehavior, British law inforcements indirectly encourage criminals to continue attacks on Russian diplomatic property in the UK. Zakharova’s statement on “Trespassing on the Russian Trade Mission premises in London” ( source ): During our briefings, we have repeatedly discussed compliance with the Vienna Convention on Diplomatic Relations, specif
1 comment
Read more